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published in Blogs
Dec 09, 2020

NetApp Breaks Out of 2-Year Downward Trend

Some investors prefer to focus on fundamental analysis while others prefer technical analysis. Still others prefer to use a combination of the two analysis styles. This is where Tickeron falls, using both analysis styles. In our opinion, technical factors tend to have a greater influence over the short term while fundamentals are more important over the long run.

Sometimes we see stocks with good fundamentals that enter a downward trend and have a hard time breaking out of it. That is what happened with computer hardware manufacturer NetApp (NTAP). NetApp peaked up near $82 back in September ’18—the prices on the chart below are adjusted for dividend payments. The downward cycle started and over time a trend channel formed that defined the different cycles within the overall downward trend. The stock would eventually hit a low of $33.50 back in March.

The rally off of the March low has moved NetApp back above $60 and it appears that the most recent pop has moved the stock out of the downwardly sloped channel it was caught in for two years.

I have written about NetApp several times over the last few years and I can tell you that the fundamental indicators have been good during this whole time—even as the stock was trending lower. From an article I wrote in November ’18, I can tell you that the company was averaging EPS growth of 21% per year and was expected to see earnings grow by 24% in fiscal 2019.

NetApp’s profitability measurements at the time were impressive. The return on equity was 40.6% and the profit margin was at 19.6%. The operating margin was at 17.15% back then and that was above average compared to other companies.

Flash forward to the current readings and we see that the ROE is at 141.7%, the profit margin is at 20.9%, and the operating margin is 16.6%. These are all still at very impressive levels and instead of a P/E ratio up at 94 like it was in 2018, the P/E ratio is under 20 now.

The decline in the stock caused the sentiment to shift from a slightly bearish position to an extremely bearish position over the last two years. From the article in 2018 I can tell you that there were 29 analysts following the stock with 14 “buy” ratings, 13 “hold” ratings, and two “sell” ratings. At this time there are 27 analysts covering the stock with eight “buy” ratings, 17 “hold” ratings, and two “sell” ratings. The buy percentage dropped from 48.3% to 29.6%.

Short sellers have also increased their bearish posture. In November ’18 the short interest ratio was 3.89 and now it is 8.4. The average short interest ratio falls in the 3.0 range, so the reading from two years ago was slightly higher than average and the current reading is tremendously higher than average.

In addition to the factors listed above, TIckeron's AI platform found additional bullish signals for the stock. 

Related Ticker: NTAP

NTAP in upward trend: price rose above 50-day moving average on February 28, 2024

NTAP moved above its 50-day moving average on February 28, 2024 date and that indicates a change from a downward trend to an upward trend. In of 45 similar past instances, the stock price increased further within the following month. The odds of a continued upward trend are .

Price Prediction Chart

Technical Analysis (Indicators)

Bullish Trend Analysis

The Momentum Indicator moved above the 0 level on February 28, 2024. You may want to consider a long position or call options on NTAP as a result. In of 81 past instances where the momentum indicator moved above 0, the stock continued to climb. The odds of a continued upward trend are .

The Moving Average Convergence Divergence (MACD) for NTAP just turned positive on February 29, 2024. Looking at past instances where NTAP's MACD turned positive, the stock continued to rise in of 46 cases over the following month. The odds of a continued upward trend are .

The 10-day moving average for NTAP crossed bullishly above the 50-day moving average on March 01, 2024. This indicates that the trend has shifted higher and could be considered a buy signal. In of 18 past instances when the 10-day crossed above the 50-day, the stock continued to move higher over the following month. The odds of a continued upward trend are .

Following a +1 3-day Advance, the price is estimated to grow further. Considering data from situations where NTAP advanced for three days, in of 349 cases, the price rose further within the following month. The odds of a continued upward trend are .

The Aroon Indicator entered an Uptrend today. In of 293 cases where NTAP Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .

Bearish Trend Analysis

The RSI Indicator has been in the overbought zone for 1 day. Expect a price pull-back in the near future.

The Stochastic Oscillator has been in the overbought zone for 2 days. Expect a price pull-back in the near future.

Following a 3-day decline, the stock is projected to fall further. Considering past instances where NTAP declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .

NTAP broke above its upper Bollinger Band on March 01, 2024. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.

Fundamental Analysis (Ratings)

Fear & Greed

The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating outstanding price growth. NTAP’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.

The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to outstanding earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.

The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.

The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating low risk on high returns. The average Profit vs. Risk Rating rating for the industry is 80, placing this stock better than average.

The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is fair valued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: NTAP's P/B Ratio (21.413) is slightly higher than the industry average of (5.089). P/E Ratio (23.540) is within average values for comparable stocks, (57.719). Projected Growth (PEG Ratio) (0.944) is also within normal values, averaging (55.955). Dividend Yield (0.019) settles around the average of (0.035) among similar stocks. P/S Ratio (3.578) is also within normal values, averaging (9.440).

The Tickeron Seasonality Score of (best 1 - 100 worst) indicates that the company is slightly overvalued in the industry. The Tickeron Seasonality score describes the variance of predictable price changes around the same period every calendar year. These changes can be tied to a specific month, quarter, holiday or vacation period, as well as a meteorological or growing season.

Notable companies

The most notable companies in this group are Arista Networks (NYSE:ANET), Dell Technologies (NYSE:DELL), HP (NYSE:HPQ), NetApp (NASDAQ:NTAP), Western Digital Corp (NASDAQ:WDC), Seagate Technology Holdings PLC (NASDAQ:STX), Pure Storage (NYSE:PSTG), 3D Systems Corp (NYSE:DDD).

Industry description

Computer peripherals connect to a computer system to add functionality or to get information from or put information into computers. Think hard disk drive, data storage systems, cloud storage devices, printer and scanner, or mouse, keyboard etc. Some of the major companies operating in the computer peripherals industry include Western Digital Corporation, Seagate Technology PLC, NetApp, Inc., Zebra Technologies Corporation, and Xerox Holdings Corp.

Market Cap

The average market capitalization across the Computer Peripherals Industry is 7.62B. The market cap for tickers in the group ranges from 1.2K to 262.23B. ADTEF holds the highest valuation in this group at 262.23B. The lowest valued company is DPSM at 1.2K.

High and low price notable news

The average weekly price growth across all stocks in the Computer Peripherals Industry was 3%. For the same Industry, the average monthly price growth was 13%, and the average quarterly price growth was 6%. STRC experienced the highest price growth at 62%, while QBTS experienced the biggest fall at -25%.

Volume

The average weekly volume growth across all stocks in the Computer Peripherals Industry was 18%. For the same stocks of the Industry, the average monthly volume growth was 108% and the average quarterly volume growth was 92%

Fundamental Analysis Ratings

The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows

Valuation Rating: 49
P/E Growth Rating: 60
Price Growth Rating: 50
SMR Rating: 72
Profit Risk Rating: 79
Seasonality Score: 1 (-100 ... +100)
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NTAPDaily Signal changed days agoGain/Loss if shorted
 
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A.I.Advisor
published price charts
A.I. Advisor
published General Information

General Information

Provides data management and storage solutions

Industry ComputerPeripherals

Profile
Fundamentals
Details
Industry
Computer Peripherals
Address
3060 Olsen Drive
Phone
+1 408 822-6000
Employees
12000
Web
https://www.netapp.com
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NTAP and

Correlation & Price change

A.I.dvisor indicates that over the last year, NTAP has been loosely correlated with DELL. These tickers have moved in lockstep 59% of the time. This A.I.-generated data suggests there is some statistical probability that if NTAP jumps, then DELL could also see price increases.

1D
1W
1M
1Q
6M
1Y
5Y
Ticker /
NAME
Correlation
To NTAP
1D Price
Change %
NTAP100%
-1.87%
DELL - NTAP
59%
Loosely correlated
-2.26%
HPQ - NTAP
49%
Loosely correlated
-1.19%
PSTG - NTAP
45%
Loosely correlated
+0.70%
STX - NTAP
43%
Loosely correlated
+1.26%
WDC - NTAP
39%
Loosely correlated
+0.03%
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